Narrow Results

This paper studies the spillovers of global liquidity and monetary policy divergence from advanced economies to Vietnam. Applying the structural Bayesian Vector Auto-Regressive model with Sims–Zha prior distribution, we find that unconventional monetary policy shocks of major central banks led to a reduction in inflation and short-term interest rate as well as an appreciation of local currency in Vietnam. However, market liquidity provided by surge in the cross-border credit flow led to a temporary upward pressure on inflation, interest and foreign exchange rates. Both types of global liquidity caused an insignificant effect on stock price which evidence the dominance of traditional interest rate and bank-lending over asset price channels in Vietnam. When disintegrating the effects among the monetary shocks from the US, European Union and Japan, the empirical result reveals some evidence of contradictory effects. Accordingly, GDP decreased after Fed’s asset purchase while it slightly increased following the same action from European Central Bank. Quantitative easing shocks also caused a depreciation in USD and Euro, resulting in a decrease in foreign exchange rate but large-scale asset purchase from the Bank of Japan is translated into an upward trend in the exchange rate.

This paper analyzes the emergence of new technology-based sectors in China based on Chinese patent data. We apply the research framework based on product-space methodology to Chinese patent data and find that China displays similar characteristics to other developed countries. The technology structure based on local accumulated capabilities at the province level plays the biggest role in the emergence of new technology-based sectors. Furthermore, we find that the accumulated technological capabilities in adjacent provinces have positive spillover effects to this emergence and the accumulated technological capabilities in non-adjacent provinces have uncertain effects to this emergence; the spread of capabilities is constrained by geographical distance.

This study uses world input–output (IO) data from 1995 to 2014 to investigate the influence of economic ties on employment in the United States and China. We conclude that the job spillover in China mainly increase the number of jobs employed by the manufacturing industry and the service industry in US, especially the employment of medium- and high-skilled labors accounting for more than 90%. In the meantime, the job spillover effect in the US to China is increasing constantly, especially to the employment of low- and medium-skilled labors in manufacturing and service industries, which tend to be further enhanced. However, the main factors of employment changes on both sides that are from the changes of industrial structure, rather than the impact of foreign products. The most important thing is that the production between China and the United States doesn’t reduce the number of each other’s employment, but optimizes the employment structure of each other, forming a “win–win” situation.

One main motivation of attracting inward foreign direct investment (FDI) for emerging economies is to obtain knowledge spillovers from developed countries and promote domestic innovation. The effects of FDI on innovation include both the direct effects from FDI on targeted domestic firms and indirect effects from foreign ownership on other foreign and domestic firms’ innovation. Applying a design with a two-stage randomization procedure that allows for both direct and indirect effects of FDI on innovation and allows these two effects to vary with the share of foreign firms in a well-specified cluster, we empirically investigate the effects of inward FDI on Chinese firms’ innovation using patent filings as a proxy for innovation. Our findings indicate that the potential innovation of firm varies with the share of foreign firms in the cluster. The approach used in this paper can help researchers and policymakers to better understand the benefits of inward FDI promotion programs, agglomeration and regional policy.

This paper investigates the impact of index futures tradings on day-of-the-week effects for the equity index in Taiwan's equity market. Using the extensive model of Hiraki, Maberly and Taube (1998), the empirical findings support the hypothesis that the introduction of index futures has a significant impact on the return structure, both in terms of daily seasonalities and the lag effects of past returns on current returns. Of particular interest, Tuesday effects gradually disappeared after the introduction of index futures, and in the post-futures period, Monday returns are found to be anomalous. After controlling non-normality of the error distribution and time-varying conditional variance, the results indicate that the Monday and the Tuesday effects co-exist after the index futures listings. Although the US equity market is shown to have a strong influence on the Taiwan's market, the pattern of weekend effects shift remains unchanged after taking the US spillover into account. The closing of Saturday trading is found to be a partial cause of the observed shift.

Many emerging economies seek multiple and diversified means of economic development, including openness to inward foreign direct investment. However, some scholars and protectionists claim this hosting of economic activity on the part of multinational corporations (MNCs) might in fact be detrimental to economic development. This paper seeks to address these concerns by using panel data from Argentina, Brazil, Colombia and South Africa to investigate a mediational relationship among inward foreign direct investment, skilled labor supply and entrepreneurial activity in the emerging economy context. Our results provide empirical evidence of later stage entrepreneurial activity as a spillover effect of inward foreign direct investment and that this indirect effect is fully mediated by the pool of factory workers.

Using the 2016 SEC Tick Size Pilot Program, we study the effects of an increase in tick size on institutional trading, market making costs, profitability, and activities. We find that increasing the tick size deters institutional trading participation, as it results in unfavorable stock characteristics, such as greater price impact and depressed share prices. In particular, we show that the implementation of the pilot program creates a substitution effect, which causes mutual funds to migrate from pilot (wider-tick) stocks to control (narrower-tick) peers. Furthermore, we document that widening the tick size increases adverse selection and inventory costs and thus reduces market making profitability, leading to lower market-making activities. Further analysis shows that these adverse effects can be attributed to the trade-at rule that prevents price-matching in non-displaying trading centers, while the quote rule that mandates a minimum quote increment of five cents enriches market makers and promotes liquidity provision. Finally, we show that our results are more pronounced for tick-constrained stocks than for unconstrained ones. Overall, the evidence contradicts the SEC’s intent to use a larger tick size to incentivize market making in small-cap stocks and attract more investors to trade these stocks, and dispraises the “one-size-fits-all” approach undertaken by regulators.

This research utilizes the Autoregressive Moving Average–General Autoregressive Conditional Heteroskedasticity (ARMA–GARCH) and Autoregressive Moving Average–Exponential General Autoregressive Conditional Heteroskedasticity (ARMA–EGARCH) in studying the spillover and leverage effects of returns and volatilities of seven equity exchange-traded notes (ETNs) and their tracked stock indices. This study finds positive returns transmissions between the two investment instruments. Unilateral influence and bilateral relationships also exist that may help investors in finding investment clues to approximate possible movements of ETNs about stock indices and vice versa. This paper also observes negative returns and volatility transmissions that may caution traders in the possible reversal of movement of the other instrument. Disinvestments, transfer of allocation, and inverse investing strategies are some of the possible reasons attributable to this negative relation.

The impact of unconventional monetary policies adopted by advanced economies in the wake of the Global Financial Crisis has had far reaching implications for global economic conditions. Although several transmission channels of quantitative easing to financial market and exchange rate conditions have been identified, there is a lack of empirical investigation on the spillover effects to exports for emerging market economies. The research presented in this paper focuses on assessing the asymmetric transmission of unconventional monetary policy in the US on exports for fifteen emerging market economies. Employing the panel ARDL (Autoregressive Distributed Lag) model, we find that the increase in large-scale asset purchases in the US corresponds to a decline in exports in the emerging market economies. The effect on exports is more sizable in the Fragile Five than in the other 10 emerging markets. Finally, although monetary policy shocks from the US transmit to impact trade in emerging markets, the effect is asymmetric. Specifically, the tapering of the quantitative easing does not have a statistically significant effect on exports.

Europe was the first continent to create concomitantly a large-scale carbon market to reduce the level of carbon emissions and to create a green bond market to finance the transition to low-carbon economies. In this chapter, we study the respective roles of these instruments, their price trajectories, their interaction, and their potential complementarities over a six-year period (2014–2019). We enrich the literature on environmental markets in several respects. First, we report significant short-run and long-run persistence of shocks to the conditional correlation between the European carbon and the European green bond markets. Second, we detect bidirectional shock transmission effects between those markets but no significant spillover effects. Taken together, these results suggest that a green bond issued in Europe may be used to hedge against the carbon price risk.

This chapter investigates the impacts of the introduction of the euro on the pattern of stock market linkages and the dynamic process of stock market integration over the period from 1989–2003. On a regional level, we examine integration among stock market indices of European Union (EU) countries with the European Monetary Union (EMU) while on a global level, integration of the EMU vis-à-vis Japan and the US are analyzed. We assess stock market integration within the context of a bivariate exponential generalized autoregressive conditional heteroscedasticity (EGARCH) framework with time varying conditional correlations. First, we discuss that European stock market integration has undergone a clear regime shift. Second, we find a striking number of significant return and volatility spillovers within the EMU and for the entire EMU region with the US and Japan and that these linkages have strengthened with currency unification. Third, we show that the introduction of the euro has indeed caused this stock market integration. Finally, our seemingly unrelated regression estimations (SURE) find that stock market integration is a persistent and seasonal process as its main determinants are the existing levels of integration and stock market development and there are signs of a positive January effect. While the introduction of the monetary union has in general been a significant driving force behind this regional and global phenomenon, the effectiveness of the different economic convergence criteria associated with the EMU in driving this process differs across member states. On a global level, the commitment to price stability has significantly strengthened stock market integration between the EMU and the US whilst convergence in industrial production has increased ties between the EMU and Japan.